Bank of the Ozarks: Don't feed the alligators
For a bank, achieving record profits requires delicate balance: one slip and into the swamp of defaults, bankruptcies and frozen credit you go. Tiptoeing past the morass is Bank of the Ozarks (Nasdaq:OZRK), which just posted new highs in net income and earnings per share.
Headquartered in Little Rock, Ark., Bank of the Ozarks reported record net income of $9 million in the third quarter through September, up 7.2% from the previous year. Earnings per share were a record $0.53, up 6%. Dividends for the bank, with market capitalization of $479 million, yield 1.8%.
Standout results, to be sure. But Bank of the Ozarks still needs to step carefully: real estate development and construction loans pose a risk, as they do for many regional banks. Pushed out of the residential mortgage market by other lenders, these banks turned to commercial real estate loans in recent years. As yet, write-downs of commercial real estate construction loans haven’t come close to matching what remains on the books. These loans also are not targeted by the $700 billion bank bailout, which is aimed at relieving those who meddled in faulty mortgage loans and tangled derivative trades.
To some investors, construction loans are the next unmortared block waiting to fall onto the economy. Bank of the Ozarks has loans and leases of $2.06 billion, up 13.2% from a year ago, and these include a lot of construction and development loans. At the end of December, real estate loans were 82% of total loans and leases, and . . .
Headquartered in Little Rock, Ark., Bank of the Ozarks reported record net income of $9 million in the third quarter through September, up 7.2% from the previous year. Earnings per share were a record $0.53, up 6%. Dividends for the bank, with market capitalization of $479 million, yield 1.8%.
Standout results, to be sure. But Bank of the Ozarks still needs to step carefully: real estate development and construction loans pose a risk, as they do for many regional banks. Pushed out of the residential mortgage market by other lenders, these banks turned to commercial real estate loans in recent years. As yet, write-downs of commercial real estate construction loans haven’t come close to matching what remains on the books. These loans also are not targeted by the $700 billion bank bailout, which is aimed at relieving those who meddled in faulty mortgage loans and tangled derivative trades.
To some investors, construction loans are the next unmortared block waiting to fall onto the economy. Bank of the Ozarks has loans and leases of $2.06 billion, up 13.2% from a year ago, and these include a lot of construction and development loans. At the end of December, real estate loans were 82% of total loans and leases, and . . .
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About the Author
Contributing author Jennifer Allen has two decades of experience as a writer and editor, mainly as a financial wire service correspondent.